Making the tax system fair
Iain Duncan Smith’s principled resignation was an interesting move for a political party not necessarily famous for their solidarity with the underclass.
Indeed, under Thatcherite umbrella the rich should be encouraged to get a great deal richer, and in doing so, they would drag the less well-off along in their wake with the result that overall the economy would benefit.
Poor George Osborne has been made to look like something of a fool by following this well-trodden path at a moment when one of his colleagues was spoiling for a resignation and the fight.
On the surface, Duncan Smith’s stand might inspire admiration from onlookers - but it’s a little more complex than that. He has broadly made two suggestions as I understand it.
First, the cuts to welfare for the disabled should not go ahead. That’s fine, how can anybody object?
It’s Duncan Smith’s second argument that seems empty: He has suggested that it was adding insult to very little injury to raise the threshold for higher rate tax at the same time.
Making people pay higher rate tax when they are earning less than £45,000 is not in the best interests of society. It’s doubtful that anyone who lives in the south-east would believe that a salary at this level is acceptable, let alone high.
The recent political upheaval leaves us with a large budgetary gap to fill. There must be numerous perfectly good ways of doing this. My favoured route would be to increase the top rate of tax for those earning over £150,000 (perhaps even a touch higher at £175,000) and set that at whatever rate was needed to make up the shortfall.
There’s no reason why a 50% or even a 60% rate would be unacceptable to the vast majority of the populace, including many Tory voters.
If that is deemed unacceptable by Mr Duncan Smith, Mr Osborne or the latter's successor, perhaps increasing VAT to the maximum level permitted by European legislation (or a higher level of our own choosing after June) on luxury goods might fit the bill just as well.
If nothing else, that will allow us to relish a tremendous debate about what constitutes a luxury good. To start the ball rolling, what about cars costing over £30,000, anything purchased from a jeweller and 4K TVs.
It’s likely that Duncan Smith’s stand (or tantrum, depending on your view) will lead to several more resignations. Probably not a departure from Europe, but considerable instability as Exchequer scrabbles around to fill that black hole.